August 28, 2017

FASB issued the final Accounting Standards Update (ASU) to improve and simplify accounting rules on hedge accounting (Topic 815). The new standard refines and expands hedge accounting for both financial and commodity risks. Its provisions create more transparency on the presentation of economic results, both on the face of the financial statements and in the footnotes, for investors and analysts. The ASU becomes effective for public companies in 2019 and for private companies in 2020, while early adoption is permitted.

For public companies, the new standard takes effect for fiscal years and interim periods within those fiscal years, beginning after December 15, 2018. For private companies, it takes effect for fiscal years beginning after December 15, 2019 (and interim periods for fiscal years beginning after December 15, 2020). The ASU aims to better align hedge accounting with an organization’s risk management activities in the financial statements. 

 

In September 2016, FASB had issued an Exposure Draft that generated 60 comment letters. FASB also engaged in extensive stakeholder outreach, including numerous discussions with investors and other financial statement users. The proposed ASU had set forth the Board’s recommendations for improving this area of financial reporting and for simplifying the application of hedge accounting guidance, without compromising the quality of financial reporting information provided to investors. The consultation on the Exposure Draft had ended on November 22, 2016.

 

Related Links

ASU on Hedge Accounting (PDF)

Costs and Benefits of ASU (PDF)

Proposed ASU (PDF)

Keywords: Americas, United States of America, Banking, Accounting, Hedge Accounting, Topic 815, ASU, FASB

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